OK, I got you.
While it's true that if she lived in it for the last 2 of the 5 years, she can sell it "capital gains tax" free, if I were you, I would check with an attorney to see if there are particular rules for wive's selling to husbands, as it often is not an "arms length transaction". What could happen is that you can artificially inflate the sales price, since she pays no "capital gains", which increases your basis later on, lowering your capital gains tax later on, while upping your depreciation in the meantime.
I don't know if the IRS would have a big issue with it. In fact, if you artificially inflate the value too much, you might wind up with a capital loss later on. You may also need an appraisal as someone I worked with gifting property to his daughters was requested by the state tax authorities to produce an appraisal.
As to the mortgage, for most mortgages, you can continue to pay the same mortgage if the property is transferred to you as transfer of properties between spouses does not trigger the "due on sale" clause as it is an exemption spelled out in the "St Germain" act. See exemptions under paragraph (d) sub par. (6):
http://www.law.cornell.edu/uscode/12...1---j003-.html
Having said that, there are some special mortgages that has rules of it's own, issued by state or Federal government authorities, special programs etc., so you'll have to have an attorney review the mortgage documents, that the St Germain law may not apply.
If it was just quit claimed, you'll depreciate it on the basis that she bought it at. Now, does it make such a big difference annually comparing the two depreciation values to go thru the trouble of a sale??
You'll certainly lock in some savings in the capital gains tax though.